WA budget to affect living costs: Premier

THE West Australian budget will "impact" the cost of living so the state can retain a surplus, Premier Colin Barnett says.

Mr Barnett promised in the March 2013 state election campaign that his government would keep electricity price increases "at or around the rate of inflation" after forward estimates indicated it could be about seven per cent.

But new Treasurer Mike Nahan conceded on Wednesday the government would "struggle to meet inflation" when it handed down its budget on May 8.

On Thursday, the premier said the hike would be about four per cent, compared with the Reserve Bank of Australia's two to three per cent inflation target.

"When this budget comes down, it is going to impact on the cost of living, but we're keeping it to the absolute minimum so we retain a surplus," he told Fairfax radio.

Mr Barnett said taxpayers were currently cross-subsidising electricity consumers.

"We'd like to eventually get to the position where electricity customers are actually paying for the cost of electricity. We're not there yet," he said.

"We're getting close ... but it's going to take longer to get there in terms of electricity."

Mr Barnett attributed the state's difficult financial position on lower iron ore prices and a higher Australian dollar.